Monthly Report January 2017 Egypt s Economic & Political Update
Page 1 FOREIGN POLICY & TRADE Salva Mayardit, South Sudan President, had a two-day visit in Cairo to meet with President Abdel Fattah El Sisi President El Sisi met with the presidents of Belarus and Macedonia, and Prime Minister of Jordan, in addition to other former heads of states, including Lebanon, Romania, and Ukraine, as part of an international conference titled Democracy and Security in a Time of Fundamentalism and Terrorism organized by Bibliotheca Alexandrina Minister of Foreign Affairs, Sameh Shourky, and President El Sisi participated in the 28th African Union Summit in Addis Ababa, Ethiopia STAKEHOLDERS UPDATE Naglaa Mousa Balabel has been appointed head of the Agriculture Quarantine Agency Dr. Ismail Selim becomes Head of the Cairo Regional Center for International Commercial Arbitration Col. Tamer Mahmoud El-Refai named as the new spokesman of the Egyptian Army PUBLIC POLICY & REGULATIONS Prices of over 3,000 individual medicines will see a price hike of 30-50% under the new pricing scheme approved by the Ministry of Health. In addition, retailed prices of 20% of all imported products and 15% of domestic will also rise The General Organization for Export and Import Control (GOEIC) becomes the singular government body mandated with regulating private sector imports of strategic agricultural goods President El Sisi hosts a National Youth Conference in Aswan, announcing multiple decisions aimed at improving living standards in Upper Egypt, including unemployment, establishing industrial zones for SMEs, and upgrading services
Page 2 OTHER MONITORED ISSUES Ministry of Petroleum and Mineral Resources launched its first international tender for gold mining concessions in eight years, with controversial investment terms driving investors away GoE reaches an agreement with Ireland to re-open the Egyptian market to exports of Irish Beef Over 130 car model prices hiked this month, including BMW, Hyundai, Jeep, and Toyota Pharco Pharma is set to begin working on its EGP 1 billion oncological plant Tahya Misr Fund has received almost EGP 7 billion in donations from July December 2016 Initial cost of EGP 400 million for a church and a mosque being built by the Armed Forces Engineering Authority in the New Administrative Capital Minister of International Cooperation, Sahar Nasr, has requested from the World Bank USD 200 million to support SMEs and USD 200 million to support labor intensive projects Ministry of Petroleum approves a USD 8 billion strategy to develop the petrochemicals sector and refining facilities Nestle acquires Egyptian Caravan Marketing Company, widely known for the Bonjorno instant coffee Football player Mohamed Aboutrika and Juhayna s Safwan Thabet added to the GoE s terror watch list Egypt's High Administrative Court ruled that Tiran and Sanafir should remain in Egyptian possession and not be transferred to Saudi Arabia. The GoE s cabinet approved the establishment of an authority to manage the Golden GDP GROWTH The GoE has raised its estimate of GDP to EGP 3.4 trillion, up from the initial EGP 3.22 trillion due to the EGP floatation. Ashraf El Araby, Minister of Planning, claims that the growth rate for FY2016/17 is expected to be at least 4%, compared to the 5.3% stated in the budget. The private sector contribution to growth will most likely be negatively affected, due to the EGP floatation. GDP on the current market prices has reached EGP 841.6 billion in Q1 FY2016/17; up from EGP 710.5 billion in the same time the previous FY. The size of total implemented investments during Q1 FY2016/17 reached EGP 102 billion, 27% higher than the same period in FY2015/16. The private sector accounted for 69%, the government sector for 16.2%, economic bodies for 9.6%, and general investments for 4.9%. Moreover, the most significant sectors that accounted for investments in Q1 FY2016/17 were constructions 23.6%, excavation 15.4%, and health and education 15.4%.
Page 3 MONETARY POLICY In its meeting held on December 29 th, 2016, the Monetary Policy Committee (MPC) decided to keep the overnight lending rate, overnight deposit rate, the of the CBE s main operation, and the discount rate unchanged at 15.75%, 14.75%, 15.25%, and 15.25% respectively. The MPC will meet 8 times in 2017 to determine the CBE s return rate. The meetings are scheduled for February 16 th, March 30 th, May 18 th, July 6 th, August 17 th, September 28 th, November 16 th, and December 28 th. During 2016, the CBE raised its basic interest rates three times, 1% in June, 3% in November, followed by the flotation of the EGP. INFLATION Headline inflation published by the Central Agency for Public Mobilization and Statistics in January 2017, increased by 3.13% in December 2016 compared to 4.85% in November 2016. In addition, the annual rate increased to 23.27% from 19.43% in November 2016. The monthly increase was driven mainly by a rise in prices of red meat and poultry, which contributed to 0.71% of headline inflation, in addition the rise of prices of eggs, cheese, and milk which contributed to 0.34%. Core inflation computed by the CBE increase by 4.35% compared to 5.33% in November 2016, with the annual rate increasing to 25.86% from 20.73% in November. Headline Inflation Core Inflation 30% 25% 20% 15% 10% 5% Source: Central Bank of Egypt
Page 4 NET INTERNATIONAL RESERVES Net international reserves have increased to 30 FY2016 FY2017 USD 24.37 billion by the end of December 2016, 25 up from USD 23.05 billion in November 2016, approaching the CBE s target of USD 25 billion 20 by the end of January 2017. According to the Economist Intelligence Unit, the EGP is amongst 15 12 currencies expected to appreciate against the USD in 2017, expecting it to appreciate by 14%. 10 Minister of Petroleum stated that repayments of 5 USD 3.5 billion to International Oil Companies (IOCs) have been pushed back due to the foreign exchange reserves. USD 0 bn USD bn. Egypt has raised USD 4 billion across 3 tranches from a Eurobond sale. The issuance consisted Source: Central Bank of Egypt of USD 1.75 billion of 5-year bonds yielding 6.13%, USD 1 billion of 10-year bonds yielding 7.5%, and USD 1.25 billion of 30-year bonds +5.7% yielding 8.5%. The bonds will be listed on the Luxembourg Stock Exchange.
Page 5 TOURISM During FY2015/2016 tourism revenues made up 7.3% of total foreign currency inflows and 11.3% of Egypt s total GDP. Regardless of Italy and Russia restoring flights to Egyptian touristic destinations, the Tourism Development Authority is targeting 8 million tourists in 2017, a 50% increase from 2016. The Egyptian Embassy in Berlin, Germany has announced that Germany will lift any restrictions to flights to Sharm El Sheikh. The German Ministry 14 12 12.1 Number of Passengers 2016 11.8 of Transportation reversed the decision that required airplanes to fly at 10 a minimum altitude of 26,000 ft above South Sinai, which means airlines can now fly directly to St. Catherine and Sharm El Sheikh International Airports. 8 6 4 2 5.3 1.3 6 2.3 Fly Egypt, a budget airliner, launched a route between Borg El Arab Airport and Abu Dhabi. In addition, the company has re-launched flights between Hurghada and Sharm El Sheikh Airports, and Germany, as part of a one-year agreement with FTI, a German tour operator. 0 mn Cairo Airport Sharm El Sheikh Airport Hurghada Airport 2015 2016 Source: CAPMAS Arkady Dvorkovich, Russia s Deputy Prime Minister stated that the resumption of Russian flights would begin with Cairo International Airport followed by Red Sea destinations. On the same note, the Minister of Civil Aviation, Sherif Fathi, will be visiting Russia in February.
Page 6 PARLIAMENT The cabinet has approved a draft Bankruptcy and Restructuring Law, aiming to simplify post-bankruptcy procedures and developing an intermediary system that reduces the need to deal with court proceedings when companies go into arrears. According to the Minister of Parliamentary Affaris, Magdy El Agati, the new NGO Law, which was approved in November 2016, has not been submitted to the President for ratification. The Legislative and Constitutional Affairs Committee has approved a bill to amend the Protest Law in agreement with a Higher Constitutional Court decision asserting that the Ministry of Interior must appeal to the court before attempting to block or transfer legal protests. Parliament s Religious Committee has responded to President s Sisi calls for amendments to the Divorce Law. The new law should require both the wife and husband to be involved in the divorce process. A delegation from the Foreign Affairs Committee headed to Brussels to attend a hearing session on Egypt at a conference at the European Parliament. A few of the main topics of discussion included the Syrian and Libyan crises, and the new NGO Law.